stREITwise Review: How Does This Investment Opportunity Work?

Getting your asset allocation right is one of the keys to successful long-term investing. But when you’re just getting started, certain asset classes tend to be neglected in a typical investment portfolio. In particular, many people with otherwise solid investment strategies completely neglect any type of real estate investment.

Some people justify their lack of real estate investments by saying that publicly traded companies own land and real estate. Others consider their personal residence an adequate real estate investment. But in many cases, real estate is simply overlooked.

If you’re not currently investing in real esate, or your primary investments in real estate are publicly traded REITs, you may want to consider adding a private REIT such as stREITwise to your portfolio.

stREITwise is a real-estate investment trust with low fees (relatively) and low investment minimums. It invests primarily in cash-flow (rental) real estate, so investors may see the benefit of cash flow throughout the life of the investment.

If you’re considering investing in real estate, but you don’t want to own a rental property, investing in stREITwise could be for you. Before you invest, here’s what you need to know.

stREITwise Is an REIT

An REIT (or real-estate investment trust) is a company that owns and manages cash-flowing real estate. The REIT will pass along profits to its shareholders in the form of a dividend. REITs are typically considered an illiquid type of investment. That means it’s tough to get your principal investment out except after a set period of time.

stREITwise is an REIT that manages real estate (mostly office properties). It is open to most investors. Historically it has returned dividends of 10% annually (dividends are distributed on a quarterly basis). However, it is impossible to say whether the company will continue to distribute its dividends on such a robust basis.

If you invest in stREITwise, your initial investment is locked up for at least one year. After the lockout period, you can redeem shares on a quarterly basis.

stREITwise Fees and Pricing

As far as investments go, REITs such as stREITwise have more structural risk than real-estate index funds or publicly traded stocks. They also come with higher fees. stREITwise is known as a low-fee REIT, and it charges a 3% upfront investment fee plus a 2% annual management fee. These are fees you’ll be charged even if stREITwise fails to perform.

One thing about stREITwise is that they have very transparent fees. Especially compared to other platforms. While that 3% upfront may seem high, when you look at other platforms, they advertise one up-front fee, but then have many "hidden fees" within their funds or what sponsors charge.

Who Can Invest in stREITwise?

If you’re an accredited investor (income over $200,000, or $300,000 as a couple, or a million-dollar net worth outside of your primary house), you can freely invest in stREITwise.

If you’re not an accredited investor, you may still invest, but you face limits on your investment. Your total investment must be less than 10% of your net worth (excluding your home) and less than 10% of your annual income.

If you live outside of the United States, you can contact stREITwise to learn about whether or not you qualify. The company has a process for approving international investors.

Can I Invest Using Retirement Accounts?

If you choose to invest in stREITwise, you can invest in a self-directed IRA or a Solo 401(k). You can also invest in an individual or joint account.

Right now, stREITwise doesn’t support traditional or Roth IRAs. Before opening any tax-advantaged account, you may want to speak to a tax professional or a financial advisor.

Are REITs or Rental Properties Better?

When it comes to a showdown between REITs and rental properties, it’s tough to say whether one is better than the other.

REITs are completely passive, and are more liquid than rental properties. However, an investment manager runs the investment, not you. Rental properties tend to be a lot of work on the front end, and they have a higher potential return. However, you can also lose a lot of money with rental properties.

I would argue that most people should have real estate in their portfolio, but choosing between an REIT like stREITwise and a rental property is a personal decision.

Bottom Line

stREITwise is an excellent privately traded REIT, but it is a risky investment. It’s important to understand how the REIT will fit into your overall investment strategy before putting money into it.